The Eighth Circuit Court of Appeals rendered a decision in Brown v. Brown-Thill that deals with the arbitration of various types of internal trust disputes, including the ability to remove a trustee. Although this case involved an arbitration agreement that was separate from the trust itself, the matter concerns a number of issues that have traditionally been considered to be beyond the scope of a tribunal’s powers and thus provides an important precedent in the growing field of trust arbitration.

The opinion is relatively short, and I commend it to you in its original (see law.justia.com/cases/federal/appellate-courts/ca8/13-1708/13-1708-2014-08-11.html). However, I would like to make a few general observations.

One particularly interesting feature of this decision is the way in which the Eighth Circuit drew analogies to the scope of judicial authority to undertake certain acts, such as removing a trustee. Although the court held that the arbitrator had exceeded his authority by relying solely on statutory authority rather than on language found in the trust itself (an issue that was eventually mooted by the subsequent unconditional resignation of the trustee), this technique suggests that matters relating to the removal of a trustee are not non-arbitrable as a matter of law. In fact, the opinion could be read as indicating that arbitral powers in the area of trust disputes are co-extensive with that of a court, if the parties so provide. Although the Eighth Circuit based this part of its decision on the Uniform Trust Code, the underlying principle appears sound as a matter of arbitration law and may be applicable in trust disputes arising in other jurisdictions and contexts.

Another noteworthy element involves the cross-border nature of the dispute. Although this matter can be characterized as a domestic U.S. dispute, the laws of two different states were considered relevant: the law of Missouri, which is where the dispute arose, and the law of Florida, which is where the trust was established. Thus,
the case is helpful in demonstrating how a cross-border dispute involving a trust might arise, both nationally and internationally. While the Eighth Circuit did not undertake an explicit conflict of laws analysis (the court instead simply considered the law in both states and concluded that they required a similar result), practitioners and scholars in this field will eventually find it necessary to undertake a more rigorous conflicts analysis to determine which law controls cross-border trust disputes.

It is also helpful to note that the decision is largely pro-arbitration, as demonstrated by the deference generally given by the Eighth Circuit to the decisions of the arbitrator. However, one wonders whether the Eighth Circuit was at least subconsciously affected by the status of trust arbitration in the two states in question (Florida has a statute that takes an expansive approach to the arbitrability of trust disputes and Missouri is in the process of considering a statute on trust arbitration, with a bill currently sitting on the desk of the governor). Although trust arbitration is gaining momentum in a number of U.S. states and offshore jurisdictions, it is entirely unknown in other countries. Thus, some questions arise as to whether the same approach would be adopted in other jurisdictions.

Finally, the case includes a short section regarding attorneys’ fees. In particular, the Eighth Circuit notes that “if a contract does not authorize an award of attorneys’ fees incurred in the arbitration itself, like the Arbitration Agreement in this case, it also does not authorize an award of attorneys’ fees incurred in enforcing or defending the award in proceedings under FAA § § 9–11.”

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